What are the rules for extending a lease?
It can be a complicated, stressful and expensive process to extend a lease on your flat or house, especially as the rules for each vary depending on the type of property.
But whether you decide to extend the lease will depend on a number of factors including your individual circumstances, the length of the lease, and whether you are considering selling your property in the near future.
New Government Proposals
Following years of pressure, the government has laid down proposals to make it easier and cheaper for leaseholders to extend their lease or buy a freehold. These proposals include:
• The right to extend the lease by 990 years.
• Those who extend their lease or buy their freehold will pay less. One of the charges associated with the cost of extending the lease or buying back the freehold, known as the “marriage value”, will be abolished. The “marriage value” is the additional value a lease extension would add to the property and it applies when the lease is less than 80 years in length.
Unfortunately, there is no definite timescale for the introduction of this new legislation, so it may take years for it to make the statute books yet. So, without the new legislation, leaseholders are left with extending the lease under the current system.
Why extend a lease on your property?
A leasehold property with a lease of 100 plus years, can add thousands to its marketing value. If a lease is below 80 years, alarm bells should ring as this will reduce the market value and, if it falls below 80 years, it could make the property difficult to sell or re-mortgage. Once a lease goes below 80 years, even by one day, the freeholder is entitled to 50% of the “marriage value” in addition to the lease extension price.
To be legally entitled to extend your lease, you need to be the registered owner of the property on the Land Registry for at least two years. This means that you don’t have to have lived in the property for two years, you just have to have owned it. However, it’s important to note that if you add someone else to the title deeds at a later date, this two-year clock re-sets. Additionally, if you bought the property through a shared ownership scheme and haven’t increased your share to 100%, you will not have the right to extend the lease.
Extending a lease on a flat
There are over four million leasehold flats in England and Wales. Most flat owners are legally entitled under the 1993 Leasehold Reform Act to get 90 years added to their lease. There is also no restriction on how many times the lease can be extended. Extending the lease on your flat if you live in England or Wales will have the added benefit, under the recent Leasehold Reform Act (2022), of reducing your ground rent to zero also.
Extending a lease on a house
You only have the right to extend your lease on your house by 50 years. The freeholder however, could grant more if they wish to do so. The law is more complicated with regard to house leases, so it is always advisable to get expert legal advice. Also, most owners tend to buy the freehold rather than extend their lease.
How much does a lease extension cost?
The cost of a lease extension depends on a range of factors including the property’s value, the lease length and how much you pay for the ground rent. There is also the cost of your valuation, negotiation and legal fees. You will need a valuation because you need to establish the price of your lease extension and then get a professional to negotiate with the freeholder on your behalf.
The lease extension process can be very time-consuming, complicated, and contentious, so it’s highly advisable to have professional legal support throughout the whole process.
How Can GloverPriest Help?
At GloverPriest, we provide friendly and transparent legal advice. If you would like further advice about your leasehold property, please don’t hesitate to speak to one of our expert conveyancing lawyers today. Complete our enquiry form.